Skip to Content

10 Financial Habits to Keep in Your 20s

10 Financial Habits to Keep in Your 20s

Keeping good financial habits is super important no matter how old you are.

Because yes, how you manage your finances now will make a difference when it comes to your retirement!

If you want a future where you can travel or eat out at a restaurant whenever you feel like it, the time is now to start making those good financial habits.

Many older Canadians don’t have retirement plans or don’t have enough savings for retirement, which is not a situation you want to be in when you’re no longer working.

People are also living longer nowadays, and while you’re only 20-something now, you could have another 80 years to live.

Even if you retire at 65, you could still live for another 40 years!

Living in Toronto is also very expensive, so if you plan on settling down here, you’ll need to have plenty of savings.

If you start building good financial habits now, you’ll be able to carry them on for the rest of your life, and hopefully have a more secure future.

Here are good financial habits to keep to help you stay on top of your finances!

The George Brown House in Toronto, Ontario

Disclaimer: I’m not an accountant or an expert in finance. I’m simply sharing information from my own personal experience and research. It’s up to you to manage your own finances, and hopefully these tips will be helpful to you. Please consult an accountant for professional advice!

Financial habits to keep in your 20s

1. Live below your means

Never live above your means unless you want to stress about money for the rest of your life.

If you really want a Chanel bag, maybe wait until it won’t cost a good chunk of your yearly salary.

It’s more common for people to say to live within your means, but if you really want to get serious about saving, it’s better to live below your means.

Maybe you can afford to order in every single day, but that doesn’t mean you should.

2. Only spend on your credit card what you can pay off

A credit card is not a reason for you to spend money you don’t have!!!

If you don’t have $1,000 in the bank to pay off your credit card, don’t max it out.

This will lead you into credit card debt, which will pile up and might chase you for the rest of your life.

Sure, there might be a great deal on that jacket, but by the time you pay off your credit card with interest, it won’t have been a good deal anymore.

5 Awkward Teenage Phases You Might Remember

You want to build a good credit score and keep healthy financial habits!

How to avoid overspending on your credit card

Some people choose to not own a credit card at all and exclusively use a debit card.

This way, they only spend what they actually have in their bank accounts.

Another way to help keep you from overspending is lowering your credit card limit if it’s more than you need.

Even if your credit card company offers you $10,000, maybe you only really need $5,000!

Credit card rewards

My sole reason (as taught by my parents) for having a credit card is to collect points for rewards.

If I’m going to spend that money anyways, I might as well get some “free” benefits I wouldn’t otherwise have gotten.

I collect both Air Miles and BMO Rewards to spend towards “free” flights, which is how I’m able to travel on a budget!

Some credit cards even offer cash back, but I haven’t found any ones that are worth it.

MUJI Canada

3. Stop impulse buying

I see it, I like it, I want it, I got it was basically my motto during my shopaholic days.

I was obsessed with buying new clothes, even if I only wore them once or never even wore them at all.

If I had a choice between eating or buying clothes, I chose buying clothes.

I’m slowly decluttering my wardrobe, and I always feel bad donating clothes I barely or never wore.

As good as it feels to get retail therapy out of your system, it’s absolutely terrible for your wallet and just not a healthy financial habit to keep.

Do you truly need that dress at this very moment?

Is it necessary to go on shopping sprees every week, even if it’s from cheap fast fashion websites?

Not to also mention that impulse buying is also bad for the environment.

Let’s try to make more sustainable fashion choices!

4. Keep track of sales and deals

If you see something you like, save it for later.

Bookmark the webpage, save it to your Instagram Collections – whatever way you like to keep track of things.

If by the time it goes on sale, you still actually really want it, then at least you’re not buying it at full price.

What I’ve learned over the years is that pretty much every brand goes on sale, even the ones you think never do.

If you’re looking to buy an Amazon Alexa or Kindle, maybe wait until Prime Day in July when they have good deals.

If you’re a regular Aritzia shopper, maybe wait until the Clientele sale in June to update your wardrobe for the year.

Why You Need to Try a No Spend Challenge

Even groceries go on sale, and it’s definitely worth buying things in bulk when they do – just watch for expiry dates.

No yeast in-store? No problem.

Stocked up on them last year when they went on sale for 40% off!

5. Pay for bills ahead of time

One of the most important good financial habits to keep is to pay for your bills ahead of time.

If you don’t think you’ll be able to pay it off by the end of the month, maybe skip out on eating out for a week and do some meal prep at home instead.

You can also lower things like your hydro bill by only doing laundry and running the dishwasher during off hours.

I’m guilty of forgetting and having had to pay penalties from paying bills late, so I’ve made it a rule to pay for bills immediately as I receive them.

If you regularly pay off your credit card and get charged interest for forgetting one month, you can usually call in and have the interest waived.

6. Set a monthly budget

What’s your monthly income like?

How much do you usually spend on groceries?

What essential expenses (like rent and your phone bill) do you need to set aside?

Putting together a monthly budget is extremely helpful for planning your finances.

It’s an easy way to see at a glance your income vs. expenses, and it lets you see how much “disposable” income you can set aside towards pleasure or investments.

7. Do a no-spend challenge

Try doing a no-spend challenge on the regular.

Maybe once a year, or even once every quarter.

How it works is that you set yourself a timeline to spend only on essentials like gas and groceries.

No ordering in, no going to the movies, no buying shiny new toys on Amazon.

It’s a great way to keep track of how you actually spend on a regular basis, and it basically forces you to save money.

8. Plan for the future

It might seem over-the-top to make plans for 40 years from now, but it’s really not.

If you can start saving for retirement in your 20s, do it now!!!

The average Canadian only gets around $8,000 a year from the Canada Pension Plan (CPP), which is definitely not enough to cover all of your living expenses.

Many Canadians don’t have retirement savings at all, and that’s definitely a position you don’t want to be in 40 years from now.

Think about all the expenses you’ll have: rent or mortgage, land tax (if you own a house), home repairs, car repairs, oil and tire changes, gas, food, you get the point.

What if you want to travel or buy a new car?

The Best Instagram Hashtags for Different Types of Photos

If you can even set aside $100 of your monthly income towards savings, that’s $48,000 in 40 years.

It’s not realistic for everybody to put money into savings, but there are many expenses you can cut down on to help you save money.

Some expenses you can cut down on:

  • Walk instead of taking public transit or rideshare
  • Cook instead of eating out or ordering in
  • Make your own coffee instead of buying it every morning
  • Build a capsule wardrobe instead of buying the latest trends

I also have a separate blog post all about lifestyle changes to help you save money.

9. Learn about investing

So let’s talk basic investing.

I’ll start by saying that I am no expert in investing, and I’m still learning on my own.

Learning about investing is powerful if you want to grow your finances.

If you invest that extra $100 every month and average out the interest rate at 2%, the compound interest would turn what would’ve been $48,000 to almost $75,000.

Of course, nothing is guaranteed, and you can earn or lose more.

That’s why you need to learn about investing!

Because stocks can be risky, only invest money that you’re willing to lose.

Remember not to put all your eggs in one basket either 😉

Here are the three basic investments in Canada you should know about:

  • Guaranteed Investment Certificates (GICs)
  • Tax-Free Savings Account (TFSA)
  • Registered Retirement Savings Plan (RRSP)

Guaranteed Investment Certificates (GICs)

GICs allow you to earn guaranteed interest on your investments during yearly periods.

If you’re a beginner investor or just want guaranteed return on your investments, GICs are what you should invest in.

Simply make an appointment with your bank and they’ll set it up for you!

Are GICs worth it?

I believe the average rates are between 1-2%, so it’s definitely not much unless you’re putting in a significant amount of money.

GICs are typically locked down for at least a year, and depending on the type of GIC you invest in, you might have to pay penalties if you take it out early.

So, only put money into GICs that you don’t need immediately!

You’ll also have to pay taxes on your interest earned at the end of it.

Tax-Free Savings Account (TFSA)

So what does TFSA exactly stand for?

The TFSA is a Tax-Free Savings Account that allows you to earn investment income completely tax-free, even when you decide to take it out.

Here’s a little info on the TFSA for beginners!

Contribution room

You can open a TFSA account once you turn 18 years old, and the annual contribution limit carries over to the next year if you don’t put money in.

50 Best Movies on Crave Canada

The limits have changed over the years, so you have to calculate the total based on the previous contribution limits:

  • 2009 to 2012 – $5,000
  • 2013 to 2014 – $5,500
  • 2015 – $10,000
  • 2016 to 2018 – $5,500
  • 2019 to 2020 – $6,000

For example, since I turned 18 in 2013, the total I can have contributed to my TFSAs at this point in my lifetime is $49,500.

If the limit is still $6,000 in 2021, my total will be $55,500.

Once you put money into your TFSA, it gets deducted from the total limit, and if you put more than your limit, you’re subject to a penalty tax.


You can have a financial advisor manage your TFSA, and they take a cut of your invested money whether you earn or lose.

If you do the regular TFSA, you’re also only limited to your bank’s investments, but if you have a self-directed TFSA, you can invest in other bank stocks.

I personally have a self-directed account so I can manage my own investments.

I’m not going to tell you what to invest in, because I’m not an expert.

Just do your own research, learn about the companies you’re investing in, and take time to actually teach yourself about investing!

You can learn more about TFSAs on the Canada Revenue Agency (CRA) website.

Registered Retirement Savings Plan (RRSP)

The RRSP operates similarly to the TFSA in terms of the investing process, but otherwise it’s very different.

Contribution room

The amount you can contribute to your RRSP depends on your annual income, and the CRA will tell you how much you can invest each year.

Like the TFSA, if you don’t put money into your RRSP, the contribution room carries over to the next year.

Should you max out your RRSP each year?

Well, that depends on if you have the extra funds to, as it’s money you should be keeping in the RRSP in the long-term.

There is another benefit to putting money into your RRSP, which I’ll talk about next!


You don’t get taxed when you put money into the RRSP, but you get taxed if you take it out.

The benefit of this is that you can lower your income tax now by putting money into your RRSP, and you pay it later when you withdraw the money.

Let’s take federal income taxes for example: it’s 15% on the first $48,535 you make, then 20.5% on the next $48,534.

Let’s say you make $50,000 this year.

You would pay 15% income tax on $48,535, then 20.5% on $1,465.

If you wanted to reduce your income tax this year, you could buy $1,465 in RRSPs, provided that your contribution room allows you to.

44 Best Horror Movies on Netflix Canada

Then, your total income for the year would just be $48,535 rather than $50,000, and you would only have to pay the 15% income tax!

Since you get taxed on the RRSP funds as soon as you take it out, you only really want to put in money that you don’t plan on touching until retirement.

You can learn more about income tax rates on the CRA website.


Just like the TFSA, you can have a financial advisor manage your RRSP funds for you, or you can have a self-directed account.

You can learn more about RRSPs on the CRA website.

10. Keep emergency funds on-hand

You never know what can happen in the world.

Always keep emergency funds in your bank account in case of anything.

If you have to, keep it in a savings account so you won’t touch it.

You’ll want to have enough savings to cover you for at least 3 months, if not a whole year.

What happens if you lose your job?

Or if there’s another worldwide pandemic?

The only person you’re going to want to rely on is yourself, so set aside money towards your emergency funds each month.

Even if you can literally only set aside $5 a month, that adds up to $60 in a whole year, and can cover at least 2 grocery trips for a single person.

George Brown House in Toronto, Ontario

Good financial habits to keep:

  1. Live below your means
  2. Only spend on your credit card what you can pay off
  3. Stop impulse buying
  4. Keep track of sales and deals
  5. Pay for bills ahead of time
  6. Set a monthly budget
  7. Do a no-spend challenge
  8. Plan for the future
  9. Learn about investing
  10. Keep emergency funds on-hand

Obviously it’s not easy to maintain good financial habits.

If it was, everyone would be financially free and secure!

If you actually want to have a secure future where you don’t have to worry as much about your finances, it’s important to start keeping good financial habits as soon as possible.

What are other financial habits that are good to keep? Let me know on Twitter or Instagram!

P.S. if you liked this post, you might like this post on simple lifestyle changes to help you save money, or any of my other posts on career and finance tips.

Be sure to keep up with me on Instagram, TikTokTwitter, Facebook, and Pinterest if you aren’t already!

Feel free to subscribe to my weekly newsletter to get my blog posts delivered straight to your inbox.

Jessica Lam | Toronto lifestyle, fashion, beauty, and travel blogger | Diary of a Toronto Girl, a Canadian lifestyle blog

Like this post? Pin it for later!